Inside Vans’ Missteps + How It Plans to Get Back on Track
It was a rough quarter for VF Corp., largely driven by weakness at the Vans brand.
Net losses for the first quarter widened to $57.4 million from $56 million a year, with adjusted losses per share of 15 cents. This was slightly weaker than the 12 cent loss Wall Street analysts projected, according to FactSet. Revenues were down 8 percent to $2.1 billion, in line with expectations.
For Vans, business was down 22 percent, largely from a 40 percent dip in the Americas wholesale business. The drop came after multiple quarters of sales and profit declines for Vans. In Q4, Vans revenues slid 14 percent to $857 million. Vans also dropped 13 percent to $926.9 million in sales in the third quarter.
Moving forward, rightsizing Vans is a top priority for VF. As Vans global brand president Kevin Bailey told told FN in an interview in March, “The brand is not broken.” At the time, he identified several missteps, including not innovating enough, becoming dependent on classics and becoming less strategic about where the brand shows up in the marketplace.
These problems have persisted.
“We became over-reliant on classics and particularly on really just a couple of styles, and that really was a big piece of our underperformance, and we didn’t have a strong product pipeline behind it,” Bailey said in call with analysts on Tuesday. He believes opportunity for growth can come from leaning into franchises outside of classics, such as the UltraRange and MTE lines, both of which saw double-digit growth in the quarter.
New introductions, such as the Knu Skool, like the Lowland, like the Mary Jane, are also performing well, he added, but are not strong enough to offset wider losses in classics. Vans also recently soft launched a new pinnacle category, OTW by Vans, which will come fully into the market in the spring.
In U.S. stores, Vans will reduce the number of SKUs by between 20 and 30 percent in its U.S. stores and changing the layouts of the stores.
Moving forward, VF expects Vans to return to growth in the second half of the fiscal year. In China, the brand is already seeing some growth, with Q1 growth in the high single digits. But leadership won’t take any shortcuts to get back on track across all regions.
“We’re not looking for a quick fix in this business,” said EVP and CFO Matt Puckett. “We’re setting up the brand for long-term profitable growth, and we’re not going to sacrifice that objective. I think that’s really important. And it’s taking longer than we would have liked.”